Property taxes – AG WEST INFORMATION NETWORK
Property taxes are a threat to family farms
Inheritance tax is a tax on the transfer of property following death. The Tax Cuts and Jobs Act included an estate tax exemption, which expires in 2025, which requires an estate to file and pay taxes when gross assets exceed $11.58 million per person. After December 31, 2025, the exemption amount reverts to $5 million per person adjusted for inflation, as defined by the American Taxpayer Relief Act of 2012. Previously, the Economic Growth and Tax Relief Reconciliation Act of 2001 had gradually increased the amount of the exemption to $675,000. to $3.5 million in 2009.
Farms with assets in excess of the estate tax exemption often have to liquidate some of those assets to meet their estate tax obligations, which can be up to 40% of the taxable amount. Property taxes are of particular concern to farmers and ranchers because they are based on the market value of the asset; given the constant appreciation of agricultural land and assets, this can be very high for farming and ranching families. A limitation on the inheritance tax exemption means that every year fewer farm families will be protected from inheritance tax – a clear risk to the continuity of family farms.
A recent study by the USDA Economic Research Service (America’s Diverse Family Farms: 2019 edition) indicated that in 2018, 98% of the more than 2 million farms in the United States were family farms. To preserve these family farms, serious consideration should be given to eliminating estate taxes or, at the very least, making the current inflation-adjusted TCJA estate tax exemption permanent. . By eliminating estate taxes or making current exemptions permanent, U.S. farmers and ranchers will be able to avoid, at least in part, having to liquidate inherited farm assets to meet the financial obligations of the death tax.